PERNOD RICARD - Universal Registration Document 2019-2020

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6. CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

Breakdown by accounting classification

30.06.2020

Liabilities at amortised cost

Fair value through Equity

Balance sheet

Measurement level

Fair value – profit

Loans and receivables

value Fair value

€ million

Assets

Levels 1 and 3

Equity instruments

Guarantees, deposits, investment-related receivables

156

Trade receivables and other operating receivables

906

Other current assets

Level 2

323

Derivative instruments – assets

Level 1

Cash and cash equivalents

1,935

Liabilities Bonds

9,322

9,749

Bank debt

572

Lease liabilities

522

Derivative instruments – liabilities

Level 2

Risk management 2. Management and monitoring of financial risks is performed by the Financing and Treasury Department. Reporting to the Group Finance Department, it oversees all financial exposures and processes or validates all financing, investment and hedging transactions, as part of a programme approved by General Management. All financial instruments used hedge existing or forecast hedge transactions or investments. They are contracted with a limited number of counterparties that have a first-class rating. Management of liquidity risk The exceptional measures taken as part of the response to the Covid-19 virus will have a significant impact on the Group’s earnings and cash flow. Pernod Ricard has taken all precautionary measures to ensure sufficient liquidity to meet its needs. At 30 June 2020, the Group’s cash and cash equivalents totalled €1,935 million (compared with €923 million at 30 June 2019). An additional €3,360 million of renewable medium-term credit facilities with banks was confirmed and undrawn. Group funding is provided in the form of long-term debt (bank loans, bonds, etc.) and short-term financing (commercial paper and bank overdrafts) as well as factoring and securitisation, which provide adequate financial resources to ensure the continuity of its business. The Group also set up a €7 billion EMTN (Euro Medium Term Note) programme in May 2020. The Group’s short-term financial debt after hedging was €1,100 million at 30 June 2020 (compared to €1,121 million at 30 June 2019). While the Group has not identified any other significant cash requirement, it cannot be fully guaranteed that it will be able to continue to access the funding and refinancing needed for its day-to-day operations and investments on satisfactory terms, given the uncertain economic context.

The methods used are as follows: debt: the fair value of the debt is determined for each loan by discounting future cash flows on the basis of market rates at the balance sheet date, adjusted for the Group’s credit risk; for floating rate bank debt, fair value is approximately equal to carrying amount; bonds: market liquidity enabled the Bonds to be valued at their fair value using the quoted prices; other long-term financial liabilities: the fair value of other long-term financial liabilities is calculated for each loan by discounting future cash flows using an interest rate taking into account the Group’s credit risk at the balance sheet date; derivative instruments: the market value of instruments recognised in the financial statements at the balance sheet date was calculated on the basis of available market data, using current valuation models. The hierarchical levels for fair value disclosures below accord with the definitions in the amended version of IFRS 7 (Financial Instruments: Disclosures): level 1: fair value based on prices quoted in an active market; level 2: fair value measured on the basis of observable market data (other than quoted prices included in level 1); level 3: fair value determined using valuation techniques based on unobservable market data. In accordance with IFRS 13, derivatives were measured taking into account the credit valuation adjustment (CVA) and the debt valuation adjustment (DVA). The measurement is based on historical data (rating of counterparty banks and probability of default). At 30 June 2020, the impact was not significant.

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